Friday Financial Five—September 13th, 2013

House values rising from the “underwater” grave

While being underwater elicits visions of grandeur for beach-going vacationers, it presents a horrible situation for homeowners. Owing more on a mortgage than a property is worth limits owners’ options and leads to short sales and foreclosures. There’s some good news on the horizon, as RealtyTrac is now forecasting that the number of homes “deeply underwater” has decreased to 10.7 million. They also see 8.3 million homes moving into positive equity by the beginning of 2015. An impediment to purchasing activity might be the more stringent government backed loan limits with a higher price tag set to take place next year. This will push more and more home buyers into the private market.

The debt ceiling again up for debate

It wouldn’t be a fall season without the debt ceiling coming into play. Estimates are that the U.S. will hit the ceiling sometime between mid-October and early November. So what happens if the U.S. Treasury runs out of money? There could be missed payments for Social Security and military recipients as well as interest owed on outstanding debt. There is limited time for Congress to resolve the situation, as votes have been delayed and there’s a scheduled recess the week of September 23rd.

Surprising job cuts as a result of Obamacare

Investor’s Business Daily recently published a report of companies that have cut jobs due to the implementation of Obamacare. Businesses making adjustments based on the projected costs of the mass health overhaul shouldn’t be all that shocking, but what may come as a surprise is that 208 of the 257 employers listed are in the public sector.

BOA gets removed from the Dow Jones Industrial Average

In the largest Dow makeover in a decade, Bank of America, Alcoa, and Hewlett-Packard will all be removed from the Dow Jones Industrial Average on September 23rd. The three companies that will replace them are Nike, Visa, and Goldman Sachs. As one of the major market barometers, the DJIA attempts to mirror large company stock performance, and the changes are meant to be more representative of the current economy.

The golden roller coaster

Gold makes for an interesting investment study, as it can’t be valued using traditional methods. Recent price increases coincided with the introduction of gold ETFs in the early 2000’s. Then financial instability led to rumbles that the world might revert back to the gold standard. Gold hit a high of $1900 per ounce in 2011, but has recently hovered around $1,300 per ounce. The question gold investors must ask themselves is what will drive the price higher going forward? Is it the accessibility of ETF investment, the psychology of investors looking for a hedge, or some other reason?